Measuring Innovation with Money

by Michael Graber

Innovation is such a heady, ill-defined concept. Innovation is one of those words – like strategy or creativity – that means either nothing or something different to anyone who hears it. But when handled correctly, genuine innovations are the lifeblood of any company’s continued health and success.

How do genuine innovations get measured?

Money.

Revenue and profit. Cold, hard cash. Top-line growth. Money.

Many innovation methods have stopgap checkpoints for seeing the financial potential. Our favorite is loosely based on a seven-question grid created by the authors of the Business Model Canvas. We will share its basic insights herein, as the Southern Growth Studio uses it as a starting point for judging the monetary potential of breakthrough innovations (not cost-saving or incremental innovations; however, those are measured by different metrics).

When vetting a breakthrough innovation ensure it meets at least one of these criteria. The more the better.

Switching Costs – does your innovation make it difficult to switch to a competitor? In a plain-speaking analogy, are you easy to wed and hard to divorce?

Recurring revenue – how does cash flow? Hopefully on an ongoing basis from each customer.

Earn before you spend – can you get an order without being too capital intensive? Think about Dell in its heyday, how the company changed the game by not assembling computers until orders were placed.

Game-changing cost structure – can you change the whole way an industry operates? Can you be a Netflix against Blockbuster? Change the game.

Getting others to do the work – can you enroll others to help you add value? What is Facebook without all of the many, willing users who create all the content?

Scalability – is there ample room to multiply growth in the market without too many costs added?

Protecting from competition – is your concept defensible in one way or another?

After doing the necessary field, empathy, definition, and ideation work, get your innovation team to vet their breakthrough concepts against these seven questions. If they pass at least one, green light the prototype and test, test, and refine.

Michael Graber is the cofounder and managing partner at Southern Growth Studio, a Memphis, Tennessee-based firm that specializes in growth strategy and innovation. A published poet and musician, Graber is the creative force that complements the analytical side of the house. He speaks and publishes frequently on best practices in design thinking, business strategy, and innovation and earned an MFA from the University of Memphis.

One comment

7/12/2015
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At this stage is ‘concept modeling framework.
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Shoshan Shacham
Israel